Frequently Asked Questions
I don't want this to be decided by an Arbitrator - what do I do?
If the other party has applied for the appointment of an arbitrator it is likely that there is an arbitration agreement. This could be a clause within a contract (such as a lease or option to purchase) and will set out the procedure to be followed in the event of a dispute. An arbitration agreement is binding, but with the consent of all parties, they could agree to use an alternative means of dispute resolution, such as the determination by an Independent Expert.
An arbitration is governed by the Arbitration Act 1996 (The Act). Once appointed, the arbitrator has a duty to proceed with the proceedings in accordance with Section 33(1) of the Act, avoiding unnecessary delay.
The Act gives the arbitrator the power to give directions (orders) and the parties have a duty to comply with them. The arbitrator will set out the procedure to be followed and will ultimately make an award on the substantive issue (the main dispute) which is legally binding. The arbitrator also has the power to award the costs, including the costs of the arbitrator, those of the parties and the fees of the appointing body.
So, DO NOT bury your head in the sand and hope it will go away. It won’t!
- Check whether there is an arbitration agreement and that any procedures set out in the arbitration clause have been correctly followed.
- Establish whether the dispute could be settled by negotiation.
- Ensure you are properly represented
Who pays for the Arbitrator/Expert?
The simple answer is “the parties”. How those costs are apportioned may depend whether the dispute resolver is an expert or arbitrator.
Costs in Arbitration
The way costs are to be borne is governed by the Arbitration Act 1996 (The Act).
Under S 28 (1) “the parties are jointly and severally liable to pay to the arbitrators such reasonable fees and expenses (if any) as are appropriate in the circumstances. “
After the dispute has arisen the parties are free to agree between themselves how costs are to be allocated. In the absence of agreement, the Act gives the arbitrator the power to decide the liability for costs. This power extends not only to deciding which party pays the costs of the arbitrator (including any costs such as the fees of a legal assessor) but also to the liability for the recoverable costs of the parties (such as the parties’ legal, surveyors’ and other experts’ fees) and the fees of the appointing body (RICS appointment fee).
The basic principle is that “costs follow the event” meaning that the loser pays all costs, but the Act gives the arbitrator considerable discretion to use its judgement as it considers appropriate to allocate all or part of the costs. Depending on the circumstances, this might take account of matters such as offers to settle or the behaviour of the parties. If there is no clear winner, it is likely that costs will be apportioned between the parties.
The arbitrator will not usually release the award on the substantive (main) issue(s) until their fees and costs have been paid in full. These will typically be paid by the parties in equal shares as an interim measure until the liability for costs has been decided. Once the award has been released, the parties will then attempt to agree liability for costs. If not agreed, then the arbitrator will be asked to make an award on costs. Directions will be given for the procedure to decide costs, including representations on costs.
Costs of an Expert Determination
Unlike an arbitrator, an independent does not have any statutory powers to award costs. His only powers are those set out in the agreement between the parties. Check the lease or other contract to ascertain whether the expert is required to decide the allocation of costs. It may state that the costs of the expert are to be borne equally between the parties, or that the expert is to decide who is to pay his costs whilst the parties are to bear their own. Alternatively, the contract might give the independent expert the same powers as an arbitrator to decide how all the recoverable costs are to be allocated (including the costs of the parties).
The expert will require the parties to agree to his/her terms of engagement before proceeding with the determination as this forms the contract with the parties for payment of his/her fees. The liability for fees will be on a joint and several basis, so the expert would usually agree to proceed where one party only has confirmed their agreement to the expert’s reasonable fees.
How long does an Arbitration take?
Timetable for resolution under the Arbitration Act 1996 can be agreed between the parties to the dispute. This will be imposed by the Arbitrator in the event of disagreement as to the timing of the various hurdles that are required to be addressed for resolution.
Under s.33 of ‘the Act’ the Arbitrator has a general duty to act fairly, impartially, providing each side with an opportunity to have their evidence and opinions heard and deal with those of the other side. The Arbitrator shall adopt procedures appropriate to the circumstances (noting that the parties are free to agree the same) and must avoid unnecessary delay and expense in resolving the matters falling to be determined.
The practicalities of gathering and proving evidence, the time it takes to present reports and deal with replies, will consume several weeks and therefore the whole event is likely to take some few months by the time the parties have presented their cases and the Arbitrator considered the same and written his Award. If there are preliminary matters of dispute the process can take longer as the arbitration will be broken down in to multiple hurdles, sometimes with preliminary issues requiring resolution before the substantive (or primary) issue e.g. rent, can be resolved. An Order for Directions will set out the Timetable and this should account for the ability of the parties to apply during the process for issues arising to be addressed and potentially timetables to be re-addressed for such issues that were perhaps unforeseen at the outset.
The entire matter is not resolved until the matter of liability for the costs of the dispute is finalised.
Can I choose the Arb/Expert?
The Lease should define whether the dispute is to be resolved by arbitration or reference to an independent Expert. Sometimes the Lease provides one of the parties (usually the Landlord) to decide the capacity in which the third party surveyor will act - and when that decision should be made. If the choice exists the Lease will say so. There is usually a default position if no decision is made where a choice exists.
Once the capacity in which the dispute resolver is established by choice or as stated in the lease, the parties are usually invited by the lease to agree the identity of the third party surveyor they would like top appoint. One side will then need to make an approach copying in the other side, by stated agreement and submit an invitation setting out the basic case details. If the identity cannot be agreed, the Lease will normally allow either party to apply to the RICS Dispute Resolution Service for the President to appoint or nominate one of the DRS Panel third party surveyors to act. Once appointed following the application of Landlord or Tenant, the parties have to accept that appointment unless the proposed surveyor makes declarations questioning their involvements (if any) in which case representations can be made by either party and the process repeated if the appointee has been rejected. If no declarations are made (as is usual) the parties are bound by the lease to deal with that appointee.
If embarking upon ADR via PACT lease renewal under the ’54 Act, the parties are free to agree the capacity of the dispute resolver as either Arbitrator or Expert. There are ‘pros and cons’ of both routes. However, if the parties cannot agree which route because one wants an Arbitrator and the other an independent Expert, then only recourse to court can resolve the dispute.
What is PACT
PACT stands for the Professional Arbitration on Court Terms. Developed by RICS and the Law Society, the process is aimed at unopposed lease renewals pursuant to the Landlord and Tenant Act 1954 and offers the opportunity for disputes to be resolved without the necessity of going to court. PACT provides the opportunity for landlords and tenants to have the terms and rent payable under a new lease decided by a surveyor and/or solicitor acting as either an arbitrator or independent expert. Accordingly it is an attempt to streamline the lease renewal process, making it quicker, cheaper and more efficient than going to court.
PACT is most often deployed after court proceedings have been ongoing, after the parties have managed to agree most of the new lease terms and once the court process starts to “ramp up”. The court proceedings are stayed by consent pending a PACT determination. There are a number of Model Consent Orders prepared by RICS which set out standard terms for the PACT process. The Consent Orders are drafted on the assumption that all of the terms of the lease, other than those being referred to PACT, are agreed.
As ever, if the identity of the dispute resolver cannot be agreed between the parties, the appointment of the surveyor or solicitor can be made by RICS or Law Society.
What is the role of an Arbitrator
What is the difference between an expert witness, a mediator and an advocate
The roles are completely different. A mediator is a professional appointed by the parties to assist them in their without prejudice settlement discussions. The mediator will work independently with both parties to understand their case and help them resolve their discussions through discussion and compromise. The process is completely confidential and conducted entirely on a without prejudice basis. A mediator will not share any information at all provided by one party, with the other party, without express consent of the “giving” party.
An advocate is someone instructed to argue their client’s case most effectively; whether that be in correspondence or by way of formal written submissions or orally at a hearing as part of a formal dispute resolution process; an advocate is required to operate within the confines of the professional ethics and rules of their professional, but seeks to act primarily in their client’s best interests, accentuating the strengths and downplaying the weaknesses of the client’s case.
An expert witness is someone appointed to give opinion evidence on issues within their own subject matter expertise. Any expert should be fully familiar with both the RICS guidance note “Surveyors acting as expert witnesses” and with Part 35 of the Civil Procedure Rules which set out in detail the duties and requirements for someone acting as an expert. The overriding duty of an expert witness is to the tribunal rather than to the client and the expert must give full, impartial and independent evidence, regardless of whether that evidence supports their client’s position.